Protect Your Credit Union from Legal Challenges with a Compliant Overdraft Program

By: John M. Floyd, chairman and CEO, John M. Floyd & Associates

Since 2010, dozens of large banks have faced litigation involving overdraft policies that include re-ordering transactions from highest to lowest—instead of processing them in the order they are received—to increase the number of fees they charge to consumers by charging excessive fees for transactions that result in overdrafts.

Until recently, credit unions have been spared from such litigation. But as public awareness of these lawsuits increases, advocacy groups have turned their sights to credit unions that they believe charge unfair overdraft fees. In fact, according to a recent article in the “Credit Union Journal,” a group identified as classaction.org has advertised in various media outlets seeking individuals who may feel they have been treated unfairly by a credit union to join a class-action lawsuit.

Avoid increased scrutiny with a guaranteed overdraft program

The key to avoiding such potentially costly legal scrutiny is to provide members with a clearly defined overdraft program that guarantees full regulatory compliance and consumer protection expectations, including transparency regarding fees and information about how the program works.

JMFA OVERDRAFT PRIVILEGE® is a fully disclosed overdraft solution that includes:

  • reasonable, communicated overdraft fees;
  • clearly established overdraft limits;
  • transaction clearing policies that avoid maximizing member overdrafts and related fees created by the clearing order;
  • the ability to easily monitor excessive usage;
  • communications materials that outline alternative financial products that more appropriately fit the needs of excessive overdraft users; and
  • a 100-percent compliance guarantee.

Attention to consumer protection is serious

In this new regulatory reality, consumers are pushing for more transparency, not less. JMFA OVERDRAFT PRIVILEGE® can help protect credit unions from increased legal scrutiny and potential monetary penalties with its straightforward approach of responsible use.

About JMFA

John M. Floyd & Associates (JMFA), a preferred business partner of the Northwest Credit Union Association, is a leading provider of profitability and performance-improvement consulting. For more than 30 years, JMFA has been recognized as one of the most trusted names in the industry, helping financial institutions enhance their bottom line with programs like JMFA Overdraft Privilege®. JMFA is also recognized for earnings enhancement and expense control programs, training, executive placement, account acquisition programs as well as product, service, pricing and technology-improvement consulting. Simply stated, JMFA’s programs and services are designed to increase income or reduce expenses. JMFA is proud to be a preferred provider among many industry groups. To learn more about JMFA, please contact Emily Crandall, JMFA regional director at Emily.Crandall@JMFA.com or (888) 879-3136.

 

Strategic Link is the NWCUAs wholly-owned service corporation, providing the Associations member credit unions with exclusive high-quality, competitively-priced products and discounted services. Questions? Contac t Sales & Marketing Associate Craig Reed: 206.340.4789, creed@nwcua.org.

Posted in NCUA.